MedMen fights to keep NY marijuana permit, meet $114 million debt deadline

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Marijuana multistate operator MedMen Enterprises is scrambling to keep its potentially lucrative New York operation while debt coming due in six months is forcing the company to try to sell additional assets.

The Los Angeles-based MSO wants to subpoena New York Gov. Kathy Hochul’s office in search for evidence that her staff improperly aided Ascend Wellness’ effort to gain regulatory approval for the acquisition of MedMen’s medical cannabis operation.

The New York Post reported the latest development, citing state Supreme Court records.

Hochul’s staff has denied any wrongdoing.

MedMen and Ascend are in a fierce legal fight over the New York MMJ operation, which is ever more lucrative because of forthcoming recreational marijuana in the state.

Ascend last year reached an agreement to buy most of MedMen’s MMJ operation for $63 million before lawmakers passed a recreational marijuana bill.

MedMen terminated the agreement in early January and Ascend went to court to enforce it.

And now MedMen is alleging that Hochul’s office pushed state regulators to approve the deal only days after a political fundraiser attended by one of Ascend’s executives.

Meanwhile, MedMen said Wednesday that it has been granted a six-month extension on its $114.3 million debt facility – a senior secured loan tied to the New York operation, according to regulatory filings.

According to a news release, MedMen will prepay $20 million and a $1 million fee for the loan extension. The fee will be paid in stock, according to the release.

In a statement, MedMen CEO Michael Serruya indicated MedMen will try to sell additional assets to help repay the debt.

“MedMen will utilize this six-month grace period to realize fair value for significant assets that are no longer core to our market strategy,” Serruya said in the statement. He didn’t elaborate.

The company’s annual audited financials filed in September 2021 with Canadian securities regulators show that the loan facility was secured by MedMen’s New York marijuana operation.

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The loan facility was amended on May 11, 2021, to reflect that the proceeds from the sale of the New York operation would be applied to the loan.

MedMen paid a $225,035 fee to amend the agreement, according to the regulatory filing.

The regulatory filing also shows that the interest rate on the loan facility increased from 7.5% annually to 15.5% annually per an agreement on Jan. 13, 2020, at which time the maturity date of the loan was extended from Oct. 1, 2020, to Jan. 31, 2022.

Later, the loan facility was amended again so that MedMen was required, starting in July 2021, to pay half of the monthly interest in cash.

Jeff Smith can be reached at jeff.smith@mjbizdaily.com.